This month, Amazon did what it tries to do every month, it tried to take over the world. Perhaps more interesting than shelling out £10.8bn ($13.7bn, €12.3bn) for Whole Foods Market is its reformulated Prime membership package, offering price-segmented memberships in a bid to attract greater numbers of lower-income families into the Amazon eco-system.
Instead of an £8.68 ($10.99, €9.85) monthly membership fee, consumers with a valid Electronic Benefits Transfer card, which is used for government programmes such as the food stamp Supplemental Nutrition Assistance Program (SNAP), can have an annual Amazon Prime membership for £4.73 ($5.99, €5.37) a month, a 45% discount. Greg Greeley, vice-president of Amazon Prime, said in a statement: ‘We designed this membership option for customers receiving government assistance to make our everyday selection and savings more accessible.’
While it is great to offer this accessibility to those with lower incomes, I can’t help but be slightly dubious about Amazon’s motives. The membership is just another move in the retail domination game being played between Amazon and Walmart. The latter is the current clear winner among lower-income families, with nearly £0.79 ($1, €0.89) out of every £3.95 ($5, €4.48) in SNAP benefits being spent at Walmart, bringing in £10.3bn ($13bn, €11.6bn) in sales for the retailer in 2016, according to The Wall Street Journal.
And let’s not forget – this is the company whose CEO Jeff Bezos once said: ‘Our goal with Amazon Prime… is to make sure that if you are not a Prime member, you are being irresponsible.’ The convenience of Prime Now two-hour deliveries on household items and essentials and free two-day shipping on almost everything else means many shoppers turn to Amazon before anywhere else. Indeed, Consumer Intelligence Research Partners found that Prime members spent almost double that of non-Prime members on the platform, spending an average of £1,025 ($1,300, €1,165) per year, compared with £553 ($700, €627) for non-Prime members. Amazon’s convenience is a lure to more consumerism.
In addition, this new membership doesn’t address perhaps one of the biggest problems for these lower-income consumers – access to healthy food. Prime memberships do not include a membership to AmazonFresh, the company’s grocery service, which still costs an additional £11.83 ($14.99, €13.43) a month. While greater accessibility to household necessities such as nappies and consumer packaged goods (CPG) will benefit many, a majority of these families live in food deserts, where CPGs are the only types of food that are readily available.
This stands in stark contrast to a company such as EveryTable, a fast food chain in Los Angeles that opened in 2016 and whose business model is based on opening outposts in both food deserts and well-off areas. The locations in wealthier neighbourhoods offer salads for an average of £6.30 ($8, €7.20) while the same salads in a less affluent neighbourhood will cost about £3.15 ($4, €3.60), with one location subsidising the other.
The founders are trying to address the problem at its core, bringing the same service to everyone, but also acknowledging demographic differences through pricing. Amazon seems to mostly be looking after itself. In The Future Laboratory’s macrotrend The American Middle we examine the imperative for brands to serve Middle America better and to acknowledge the needs of these often-ignored consumers, but giants such as Amazon need to take more responsibility when going after this group’s dollars. If it truly wants to support and offer accessibility for lower-income families, AmazonFresh should be next on the discount list.
To find out more about the changing mindset and expectations of America’s middle class, read our free downloadable report, The American Middle.